2 Cheap Cars charged over ad claims and “warranty waivers”

Vehicle retailer 2 Cheap Cars
Limited faces 10 charges under the Fair Trading Act 1986
over its “must liquidate" and “84% off” advertising
claims and its use of “warranty waiver” documents,
following a Commerce Commission investigation.

The
investigation was opened in November 2017 after the
Commission received a number of complaints from
consumers.

Liquidation salesIn advertising for
its 30 September and 1 October 2017 sales, 2 Cheap Cars made
statements including: “2 Cheap Cars is in hot water, it
must liquidate immediately” “A massive price drop this
weekend!”

The Commission alleges this advertising was
misleading as to the price of the cars because it suggested
that many vehicles would be significantly discounted, and
there would be no further opportunity to purchase from 2
Cheap Cars. Most of the 710 vehicles then for sale
nationwide were not discounted at all or had discounts of as
little as $5, and 2 Cheap Cars was not in, or going into,
liquidation.

“84% off” claimsIn January
2017 2 Cheap Cars’ newspaper advertising included the
phrase “84% off”. The Commission alleges this was
misleading because the “84% off” claim, together with
the phrase “Massive Stock Liquidation: This Weekend
Only” created the impression that the discount was off the
price of the cars. In fact, the discount was off the price
of a $300 GrabOne voucher that could be used towards
purchasing a vehicle.

Warranty waiversThese
charges apply to conduct between 1 January 2014 and 31
December 2017. During that time 2 Cheap Cars frequently
asked car buyers to sign a “warranty waiver” document if
they chose not to purchase an extended warranty. The
“waiver” included terms such as: “the vehicle you are
purchasing does not include a warranty of any kind.”
“[If] you choose not to purchase the indicated warranty at
this time, you must sign this waiver.”

“I do
understand that 2 Cheap Cars will comply with the Consumer
Guarantees Act. I also understand that I am, and would
prefer to be, solely responsible for any repair
bills.”

“if any repairs are carried out it will be
done by 2 Cheap Cars [L]imited at a time of their
convenience and that there are no courtesy cars
provided.”

“Consumable items such as but not
limited to tires and batteries … are not covered by the
[Consumer Guarantees Act].”

The Commission alleges
the waiver documents misrepresented consumers’ rights
under the Consumer Guarantees Act 1993 (CGA) because: under
the CGA consumers have rights of remedy against suppliers
whether or not the goods are covered by any other warranty a
consumer does not lose the CGA protections by declining to
purchase an extended warranty remedies under the CGA must be
done within a “reasonable time”, not at the convenience
of the supplier, and consumers can recover from the supplier
costs which are reasonably foreseeable as a result of the
failure. They may include the cost of hiring a rental car
while a repair is being undertaken the CGA applies to the
goods purchased which in this case includes the tyres and
batteries.

The Commission estimates that consumers
signed in excess of 20,000 warranty waivers during the
charge period and 2 Cheap Cars stopped using them in
December 2017, after being notified of the Commission
investigation.

As this matter is now before the Court the
Commission will make no further comment at this
time.

Background2 Cheap Cars operates 14 car yards
across New Zealand.

If you can’t back it up, don’t
say itConsumers need to be able to rely on the
accuracy of claims. This page of the Commission website has
information about making accurate claims and includes our
video If you can’t back it up, don’t say it.

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